Fall in investor lending continues

New investor-focused LVRs have led to a free fall in bank lending to investors, the Reserve Bank’s latest mortgage lending data reveals.

Thursday, October 27th 2016, 4:07PM

by Miriam Bell

Investors’ share of mortgage lending started to drop before the Reserve Bank announced the introduction of new lending rules for investors, but the LVRs appear to have hastened the process.

While the LVRs only officially came into force at the beginning of October, banks have been observing them “in spirit” since their announcement in July.

The Reserve Bank’s residential mortgage lending statistics demonstrate the impact this has had.

Since peaking at record highs in May, both overall lending and investors’ share of lending have declined each month.

Back in May, total new lending came in at $7.287 billion. In September, it fell to $5.831 billion, down from $6.107 billion in August.

In May, investors accounted for $2.698 billion of the month’s new lending. In September, their share fell to $1.740 billion of the total new lending.

This was a big drop on the $2.012 billion they were responsible for in August’s new lending.

At the same time, new lending to owner-occupiers has been on a steady upwards trajectory while new lending to first home buyers has bounced up and down for the last three months.

In September, owner-occupiers accounted for $3.301 billion of the new lending while $718 million went to first home buyers.

Not surprisingly, higher than 80% LVR lending to investors halved in September. It was down to $15 million in September, as compared to $31 million in July.

Of the other borrower groups, higher than 80% LVR lending was also down – to $208 million for first home buyers and to $154 million for owner-occupiers - in September.

Higher than 70% LVR lending to investors also dropped significantly in September. It was down to $337 million from $526 million in August.

Once again, the Reserve Bank’s data on the Auckland market and lending by payment type provided further support of the downward lending trend for investors.

In September, Auckland investors were responsible for $1.233 billion of the new lending as compared to $1.309 billion in August.

However, new lending to Auckland non-investors was down slightly in September too. They accounted for $1.841 billion as compared to $1.864 billion in August.

Further, the non-Auckland component of the new lending total also dropped in September. It came in at $2.757 billion as compared to $2.941 billion in August.

The lending by payment type data, which looks at interest-only and principal-and-interest loans, told a similar story in terms of investor commitments.

Interest-only loans accounted for $2.193 billion of total new lending in September, while principal-and-interest loans accounted for $3.638 billion.

Both of the overall figures had dropped from August, and interest-only lending to owner-occupiers was also down (to $1.209 billion) in September.

But there was a significant fall in the amount of interest-only lending to investors in September. It was down to $948 million from $1.053 billion in August.

Housing market commentators have been talking about an LVR-induced retreat of investors from the market.

Today’s Reserve Bank data provides further evidence of this.

Tags: banks Lending LVR mortgages RBNZ Reserve Bank

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